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Currency Presentation

The Foreign Exchange market "FOREX" is the largest financial market in the world. Unlike many markets the Forex market is open 24 hours per day and has an estimated $4 Trillion plus in turnover every day. This tremendous turnover is a multiple of the combined turnover of the main world's stock markets on any given day. This tends to lead to a very liquid market and thus a desirable market to trade.

Unlike many other securities (any financial instrument that can be traded), the Forex market does not have a fixed exchange. That is why Forex is known as trading Over-the-Counter (OTC). It is primarily traded through banks, brokers, dealers, financial institutions and private individuals.

Trades in Forex were traditionally executed over the phone. Increasingly, however, and with the help of technology and the Web, Forex trades are being executed over the Internet using especially developed trading platforms.

Although the foreign exchange market is the largest traded market in the world, its reach to the retail sector pales in comparison to the Equity and Fixed Income markets. This is in large part due to a general lack of awareness of Forex in the investor community, along with a lack of understanding of how and why currencies move. Adding to the mystique of this market is the lack of a physical central exchange.

Traditionally, access to the FX market was limited to the bank community that traded large blocks of currencies for commercial, hedging, or speculative purposes. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large amounts of deposits required precluded the smaller investors. With the advent of the Internet and growing competition it is now easily within the reach of most investors.

What is Foreign Exchange?

Foreign Exchange (Forex) is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example - Euro/US Dollar (EUR/USD). Forex contracts offered by Amana Capital are also known as Contracts for Differences (CFDs) on Forex.

For active traders and investors, Forex should be no different from other investment products such as equities, commodities or fixed-income. Just like other investment alternatives, Forex offers investors a market where they can buy or sell an investment product.

The different currency combinations represent nothing more than the value of one currency versus the value of another. That relationship is represented by a single price. In foreign exchange, the price of a currency pair is the markets expectations (at that time) of the value of that currency measured against another currency given the current and expected economic and political situation in the two economies.

The Spread

The spread is the difference between the sell price (bid) and the buy price (offer).

Example of a Forex Trade

A spot forex trade is a straightforward (or outright) exchange of one currency for another. The spot rate is the current market rate or cash rate.

As in most financial markets there is the buying and selling price also known as bid and offer price.

A broker is expected to quote simultaneously for his investors both a price at which he is willing to buy (the bid) and a price at which he is willing to sell (the offer). The difference between the two is "the spread" and the broker's profit. Amana Capital quote very competitive spreads to investors.

If you have the view that one currency will appreciate against another then you can buy that currency by selling the other.

Who trades Forex?

Banks

Asset Funds

Hedge Funds

Speculators

Retail investors

High Worth Individuals

Corporates & small business

Benefits of Currency Trading?

Trading in Forex, otherwise known as Contracts for Difference (CFDs) are leveraged positions. By definition therefore, a gain or loss generated by a CFD position is a multiple compared to what would have been generated by a cash position with the same notional value.

Trading in CFDs has grown significantly in popularity around the world over recent years, the reasons for this can be summarized as:

Ease of trading

Very tight bid/offer spreads

Low transaction costs

Customized contracts

Leveraged exposure to markets

Tax advantages in certain jurisdictions

No physical delivery

No fixed time periods

All of the above advantages exist for other CFD instruments offered by Amana Capital such as Spot Gold and Silver, Futures Crude Oil and Natural Gas and Futures Indices and Currencies.

Going Long/Short

Going Long

Going Long enables you to profit while the market is rising.

If the current price for EURUSD is 1.3780/1.3785 and you think EUR will rise versus the USD you buy it at 1.3785.

If you place an up (long) long position for 1 lot, for every point the EURUSD moves above 1.3785 you make $10 (assuming a leverage of 1:100).

For every point the market falls below 1.3785 you lose $10.

Going Short

Going Short enables you to profit even in a falling market.

You have a view that the GBP versus USD (GBPUSD) is going down.

The quote is 1.5780/1.5785. You decide to take a down (short) position on GBPUSD at 1.5780.

To close your short position on GBP versus USD you buy GBPUSD back say at 1.5760 (1.5755/1.5760) then you profit would be 20 pips x 10 = $200. Example assumes you sold 1 lot GBPUSD at leverage of 1.100.

If GBP versus USD had risen to 1.5790 you would have lost $100.

The Currency Market

Know all the details you need to know about Currency Market

Table: Currencies Indicative Pip Value

Currencies Indicative Pip Value

Instrument

Contract Size

Margin (1:100)

Pip

Pip Value

Spot

EURUSD

EUR 100,000

EUR 1,000

0.0001

$10

1.4405

GBPUSD

GBP 100,000

GBP 1,000

0.0001

$10

1.5980

USDJPY

USD 100,000

USD 1,000

0.01

$10.92

91.50

USDCHF

USD 100,000

USD 1,000

0.0001

$9.67

1.0335

USDCAD

USD 100,000

USD 1,000

0.0001

$9.56

1.0460

AUDUSD

AUD 100,000

AUD 1,000

0.0001

$10

0.8880

NZDUSD

NZD 100,000

NZD 1,000

0.0001

$10

0.7095

EURAUD

EUR 100,000

EUR 1,000

0.0001

$8.90

1.6215

EURCAD

EUR 100,000

EUR 1,000

0.0001

$9.56

1.5065

EURCHF

EUR 100,000

EUR 1,000

0.0001

$9.67

1.4885

EURGBP

EUR 100,000

EUR 1,000

0.0001

$15.85

0.9011

EURGPY

EUR 100,000

EUR 1,000

0.01

$10.93

131.80

GBPAUD

GBP 100,000

GBP 1,000

0.0001

$8.90

1.7990

GBPCAD

GBP 100,000

GBP 1,000

0.0001

$9.56

1.6715

GBPCFH

GBP 100,000

GBP 1,000

0.0001

$9.67

1.6510

GBPGPY

GBP 100,000

GBP 1,000

0.01

$10.93

146.20

AUDCAD

AUD 100,000

AUD 1,000

0.0001

$9.56

0.9280

CHFJPY

CHF 100,000

CHF 1,000

0.01

$10.92

88.55

AUDCHF

AUD 100,000

AUD 1,000

0.0001

$9.67

0.9170

Examples: Currencies Pip Value Calculation

Counter Currency USD
The pip value where the USD is the counter currency can easily be calculated when quoted against currencies with four decimals.

With a margin of EUR 1,000 leverage 1:100 and size 1 lot the pip value is equal to $10

Cross Currency (USD not a base or counter currency)

The pip value is calculated as follows: (Base currency 100,000 lots * 0.0001)/counter currency = pip value in $ 0.01 becomes 0.01 when the counter currency is JPY When the counter currency is also the counter currency versus USD then we divide with the counter currency price versus USD(Example 2)

Know what is margin trading and its types

What is Margin/Leverage?

All products offered by Amana Capital are traded on (leverage) margin. Leverage effectively allows clients to trade a notional amount that is much bigger that their initial cash deposit. This permits clients to exploit investment opportunities without having to deposit the full amount of capital as they would have done in the cash market to take an equal size position.

Clearly, leverage and margin are the two sides of the same coin. A forex position at 1% margin means in fact that the investor needs to deposit only 1% of the total purchase cost of that deal to open that position.

Example

Investors purchases 5 EURUSD contracts (5 lots long EUR) at $1.3675 (position EUR 500,000 or USD 683,750), but only deposit 1%, or EUR 5,000 towards this transaction. This is attractive to people who do not want to hold the position for the long term, and provides for leverage when trading. In this case the client has only paid EUR 5,000, if the EUR goes up 50 bps the next day, and they sell, they will have made a USD 2,500 (EUR 1,821) profit on a EUR 5,000 investment, or 36.5% return (less any possible roll-over costs). If they had been cash buyers of the EURUSD for EUR 5,000 they would have made USD 25 (EUR 18.21) or 0.365% return. A 1% margin provides a trading leverage of 100 times the initial deposit or 1.100.

Initial Margin

Initial Margin is the initial deposit required to open a position on an instrument with us once you have opened your account. The minimum account opening Margin depends on the type of account - Minimum Account Size.

Variation Margin

Variation Margin is the difference in margin requirement once the investor has opened a position, and provides for trading profits and losses.

Margin Requirements

The default margin requirement offered by Amana Capital across all products is 1:500.

Margin Calls and Liquidation

If the market moves against the investors position and the Equity Balance falls below the Initial Margin requirement the client has the option to:

Close one or more of the open position(s), in order to reduce the Initial Margin requirement to the required level;Place a "stop loss" order with us to try and avoid a deficit balance on your account; and/or,Remit further funds to the account as deposit in order to maintain the Initial Margin requirements.

Investors must maintain the margins listed in an account at all times. If the funds in the account fall below this margin, investors will be subject to a margin call to either deposit more funds to cover positions or close positions.

Investors have to monitor their account since if the funds fall below the margin the system will automatically close/liquidate the position.

Equity Balances

The equity (or balance) on your account will fluctuate according to the money the investor has deposited in the account.

During the trading day the investors account balance(s), including all open positions, are valued against the prevailing market bid or offer rate (depending if the position is long or short). Therefore the equity balance is calculated in real time and in-line with market movements.

This equity balance is used to assess the investors available margin against current positions, and potential new positions the investor may wish to take. The balance is used to establish if there is a requirement for additional margin deposits on the account.

Once a position is opened both Initial Margin and Variation Margin requirements must always be maintained for the open position(s). It is the responsibility of the investor to ensure that the account is sufficiently margined at all times, especially during volatile trading periods.

Opening Positions

How to Open a Position
A position is opened by either buying (placing a long trade) or selling (placing a short trade) on Forex, Spot Gold and Silver, Futures Oil and Gas and Futures Indices offered by Amana Capital.The diagram below shows the "Buy" (long) and "Sell" (short) buttons that initiate a long or short position in the Meta Trader 4 platform.

Important: The investor, prior to hitting the Buy or Sell button, must remember to select the correct symbol he wants to trade e.g. in this example "USDJPY" and the "Volume" he wants to trade e.g. 0.3 lot, 1.0 lot 5.0 lot.

Note that the investor can place a stop loss or take profit at the same time to manage his risk - for more details on stop loss and take profit see below.

Buying / placing a long trade
The investor can open a trade by buying or placing a long trade on any of the instruments offered by Amana Capital. To make a profit the price of that instrument needs to increase.

Selling / Placing a Short trade
The investor can open a trade by selling or placing a Short trade on any of the instruments offered by Amana Capital. To make a profit, the price of that instrument needs to fall.

Minimum Trade Size
The minimum trade size depends on the type of account.

Order Types

Buy Order

Sell order

Close Order

Pending Order

Stop Order

Buy Stop

Sell Stop

Limit Order

Buy Limit

Sell Limit

Modify Order
All pending orders, as long as they have not been executed in the market, can be cancelled or modified by the investor. The investor may want to do this because for example his/her fundamental or technical analysis or simply the latest news in the market may alter his views on the direction of the market.Pending ordersBuy Stop Buy Stop orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the market reaches a certain level price which is above the current levels then it will go up.With this type of order the investor places a stop buy on EURUSD at 1.3680 (currently say trading at 1.3610). Once the market hits 1.3680 the order is activated and the investor goes long EURUSD. The investor will profit if the market price for EURUSD continues to go up.

Example:
Suppose you are looking to buy 1 Lot of EURUSD if the price shows that it wants to go up. Assume EURUSD is currently trading at 1.3780 and you believe that if the price rises to 1.3800 or higher there will be continued upward momentum. You place a Stop Buy Order @ 1.3800 on EURUSD.

Suppose EURUSD then proceeds to trade up to 1.3800. At that time, your order would become a Market Order to buy and your order would be filled at the market.

Sell StopSell Stop orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the market reaches a certain level price which is below the current levels then it will go down.With this type of order the investor places a Sell Stop on EURUSD at 1.3580 (currently say trading at 1.3610). Once the market hits 1.3580 the order is activated and the investor goes short EURUSD. The investor will profit if the market price for EURUSD continues to go down. Example:Suppose you want to sell 1 Lot of EURUSD and you are worried that if the price falls a few more dollars that it will trigger the beginning of a much larger decline. Assume EURUSD is currently trading at 1.3780.You place a Sell Stop Order @ 1.3750 on EURUSD. Suppose EURUSD then proceeds to trade down to 1.3750. At that time, your order would become a Market Order to sell and your order would be filled at the market price.

Buy LimitBuy Limit orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the market reaches a certain level price which is below the current levels then it will go up. With this type of order the investor places a Buy Limit on EURUSD at 1.3580 (currently say trading at 1.3610). Once the market hits 1.3580 the order is activated and the investor goes long EURUSD. The investor will profit if the market price for EURUSD goes back up again. Example:
Suppose you want to Buy 1 Lot of EURUSD, and it is currently trading at 1.3780. You would like to buy the EURUSD if the price drops to 1.3750 or less, as you feel the EURUSD current price of 1.380 is slightly overvalued. You place a Buy Limit Order @ 1.3750 on 1 Lot of EURUSD. Now suppose the price trades down to 1.3750 then your order would then be bought at the market price.

Sell Limit
Sell Limit orders are useful when the investor believes e.g. with the help of technical or fundamental analysis that if the market reaches a certain level price which is above the current levels then it will go down. With this type of order the investor places a Sell Limit on EURUSD at 1.3680 (currently say trading at 1.3610). Once the market hits 1.3680 the order is activated and the investor goes short EURUSD. The investor will profit if the market price for EURUSD goes back down again. Example:Suppose you want to sell 1 Lot of EURUSD, and it is currently trading at 1.3780. You would like to sell the EURUSD and take your profits if the EURUSD price reaches 1.3800, as you feel the EURUSD price is not going to go much higher than 1.3800. You place a Sell Limit Order @ 1.3800 on EURUSD. Now suppose the price trades up to 1.3800 then your order would then be sold at the market price.

Stop Loss (SL)
Stop Loss is used for minimizing losses if the price of the underlying instrument has started to move in an unprofitable direction. If the security price reaches this level, the position will be closed automatically. Stop Loss orders can only be executed for an open position but not for pending orders.Take Profit (TP)Take Profit order is intended for gaining the profit when the security price has reached a certain level. Execution of this order results in closing of the position. Take Profit orders can only be executed for an open position but not for pending orders.

Trailing Stop Orders
Trailing stop orders are another type of Stop Loss pending order. Stop Loss is intended for reducing of losses where the symbol price moves in an unprofitable direction. If the position becomes profitable it pays for the client to shift (or keep shifting) the Stop Loss to a break-even level. This process can be automated in the MT4 - this automation is knows as Trailing Stop. This tool is especially useful when price changes strongly in the same direction or when it is impossible to watch the market continuously for some reason. To set the trailing stop, one has to execute the open position. The client has to select the desirable value of distance between the Stop Loss level and the current price in the list opened. Only one trailing stop can be set for each open position. After the above actions have been performed, at incoming of new quotes, the system automatically checks whether the open position is profitable. As soon as profit in points becomes equal to or higher than the specified level, command to place the Stop Loss order will be given automatically. The order level is set at the specified distance from the current price. Further, if the price changes in the more profitable direction, trailing stop will make the Stop Loss level follow the price automatically, but if profitability of the position falls, the order will not be modified anymore. Thus, the profit of the trade position is fixed automatically.

Trading Strategies

Speculation

Trade your own view and benefit from rising and falling markets.

Arbitrage

Trade on pricing differences between two or more instruments to make a risk free profit.

Hedging

- Reduce the risk exposure of your share portfolio by taking a short CFD position> - Flexibility combined with the ability to trade as little as a single share provides an accurate and cost effective way to hedge an existing stock portfolio - Losses in your physical portfolio can be offset against CFDs profits for tax purposes and vice versa.

Sector Trading

-Allows you to take an overall view on a group of stocks without having to trade each stock individually. E.g. Finance sector, Energy sector or Telecoms sector.- Strip out the exposure of various sectors when trading indices. E.g. Long UK100, short UK Banks- Hedge a group of existing stock positions with one easy trade. E.g. Long Vodafone, MM02 and Cable & Wireless, short UK Telecoms.

Technical versus Fundamentals?

Fundamental data is subjective, lagging indicators which are subject to revision

Prices lead known fundamentals by gradually discounting/factoring in economic data. Buy the rumor, sell the fact

Strong trends will often override economic data

Market positioning

Sentiment as a contrary indicator

How measure marker extremes of greed and fear

A mixed or hybrid approach

Basic Types of Charts

Bar Chart

Candlestick Chart

Line ChartReading the Markets

Define UPTREND and DOWNTREND

UPTREND is a succession of higher highs and higher pullback lows. The rising base (higher lows) is the important side to follow in an uptrend.

DOWNTREND is a succession of new lower lows and lower highs. The lower tops (descending res) are the important side to follow in a downtrend.

Trends are easier to spot and have longer time duration than most corrections. Therefore, the risk/reward and probability ratios favor buying dips in up trends and selling rallies in downtrends.

Trends, Trend lines & Corrections

Trend lines are formed when at least 3 peaks or troughs can be joined, representing a uniform rate of decline/rise over time.

A trend line break does not denote in itself, a change in trend.

The significance of a trend line break depends on the duration of the trend, number of touching points, pitch of trend and the prevailing chart pattern.

A channel is formed when the peaks and troughs both form a uniform rate of decline rise.

Support and Resistance

How do we determine support and resistance?

Peaks and troughs in uptrends/downtrends

Clusters of previous price activity

Major Tops and Bottoms

Trend lines and Channels

Psychological levels

Fibonacci levels

Other Types of Charts

SMA (simple moving average)

A simple moving average is calculated by adding the Securities prices for the most recent "n" time periods and then dividing by "n." To illustrate, adding the closing prices of a security for most recent 15 days and then dividing by 15 would result in a 15-day moving average. On a chart, this calculation is done for each period in the chart.

EMA (exponential moving average)

An exponential moving average differs slightly from a simple moving average in that it gives extra weight to more recent price data. This allows investors to track and respond much more quickly to recent price trends that might take more time to appear on an SMA. The formula for an EMA is: EMA = price today * K + EMA yest * (1-K) where K = 2 / (N+1).

Bollinger Bands

Bollinger Bands are a type of envelope plotted at standard deviation levels above and below a moving average. Since standard deviation is a measure of volatility, the bands are self-adjusting -- widening during volatile markets and contracting during calmer periods.

Momentum

It may also be useful in identifying overbought and oversold conditions when the Momentum becomes extremely strong or weak.

MACD (moving average convergence / divergence)

MACD is a trend-following momentum indicator that shows the relationship between two moving averages of prices. MACD is represented as the difference between two exponential moving averages. A second EMA, referred to as the "signal" (or "trigger") line, is plotted on top of the MACD to indicate buy/sell opportunities.

RSI (relative strength indicator)

RSI can also help identify turning points when there are non-confirmations or divergences. For example, a new high in price without a new high in RSI may indicate a false breakout. RSI is also used to identify overbought and oversold conditions when the RSI value reaches extreme highs or lows. This indicator automatically changes the color of the RSI plot when it exceeds either of the levels specified in the inputs BuyZone and SellZone. Horizontal reference lines are also plotted at these levels as visual aids.

Fast Stochastic

Stochastic can help identify turning points when there are non-confirmations or divergences. For example, a new high in price without a new high in Stochastic may indicate a false breakout. Stochastic are also used to identify overbought and oversold conditions when the Stochastic reach extreme highs or lows.

Slow Stochastic

The Fast Stochastic will provide more signals than the Slow Stochastic, although some analysts prefer the Slow Stochastic, believing it is less prone to whipsaws.

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Forex and CFDs are leveraged financial instruments that carry a high degree of risk and as a result, losses might exceed your invested capital and clients classified as non-retail may be required to make further payments. Trading in Forex and CFDs may not be suitable for all investors. You should ensure before trading you fully understand the risks involved and consider your level of experience. If necessary you should seek independent advice. Read the "Risk Disclosure Statement" for further details.